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24 INFRASTRUCTURE AUSTRALIA APRIL 2010
Alliance contracting is being
used as a way to deliver high
performance against key result
areas for complex and risky
projects.
Alliancing originally came to Australia
in the oil and gas industry as a way to de-
liver a marginal high-risk oil eld project
75km northwest of Dampier in Western
Australia. This benchmark project was
the Wandoo B O shore Oil Platform and
it delivered exceptional savings in project
time and cost to the client.
It was only through better management
of risks o ered by the unique framework of
an alliance that this project could proceed.
It was perhaps the earliest demonstration
of value for money that an alliance can
deliver.
e landscape has shi ed signi cantly
since then, particularly in the past 18
months in the shadow of the economic
downturn. e trend in procurement is
towards more competitive pricing, the
emergence of more hybrid/collaborative
projects and closer scrutiny of value for
money outcomes.
Commercial negotiation and auditing,
as part of the selection process, are becom-
ing more commonplace as a result.
Derek Skinner, general manager for
major infrastructure projects at the
Queensland Department of Transport
and Main Roads, commented in a recent
webinar that "changes in procurement
have led agencies to look more closely
at the value proposition for each project.
" ere is naturally more of an empha-
sis on pricing. However, we need to keep
everything in balance and ensure that the
focus on e ectiveness and e ciency is not
lost along the way."
Richard Morwood, director for alliances
and sustainable infrastructure at AECOM,
concurred saying that "it is important to
ensure that, despite any changes in market
appetite or drivers, we continue to support
a healthy industry through continued
learning and transparency".
Alliancing has also changed the type
and scope of insurance that can be pro-
cured for major projects. e advent of
an "event based" professional indemnity
policy and the LEG3 extension to contract
works insurance and design write-back on
public liability insurance are substantial
bene ts the insurance industry has deliv-
ered based on the better integrated risk
management philosophy in an alliance.
Another more immediate benefit of
alliance contracting is better interactivity
within owner/non-owner teams and it is
critical that this behaviour and the related
outcomes and insights are not lost in a
trend towards more price tension.
Apart from straight alliancing, several
collaborative hybrid contract strategies are
now also being pursued in the construction
industry such as early contractor involve-
ment, collaborative design and construc-
tion and even public private partnerships
that are injecting alliance principles into
their delivery approach.
Jacqueline Bran is the director of
alliance contracting at the International
Quality & Productivity Centre in
Sydney, a conference organiser for the
alliance contracting industry. Its10th
annual conference will be held in
Sydney on 31 May to 4 June www.
alliancecontractingsummit.com.au
Don t lose alliance contracting benefits
by focusing on price alone
Alliances have performed well
by Jacqueline Bran
Contracting
Infrastructure alliances have
performed well and contributed
value for money when de ned
and managed properly, according
to a study undertaken for several state
treasuries.
Titled "In pursuit of additional
value", the study was commissioned
by the New South Wales, Queensland,
Western Australian and Victorian trea-
suries, and carried out by Melbourne
University and Evans & Peck.
It found that 85% of alliances were
reported to have an actual outturn cost
( nal project completion costs) below
the agreed target cost.
Also, 94% of alliances were complet-
ed on or before the agreed scheduled
completion date, with 94.5% of clients
stating their alliances met or exceeded
their performance expectations.
"The alliance model promotes
a superior level of ownership and
shared accountability, enabling positive
resolution of problems inside the alli-
ance without recourse to legal action,"
commented Alliancing Association of
Australasia executive director Alain
Mignot.
He said alliance contracting will
continue to play its part in addressing
Australia s infrastructure needs.
e Alliancing Association of Aus-
tralasia is a not-for-pro t, independent,
cross-sector initiative connecting the
infrastructure industry (www.allianc-
ingassociation.org).
e study makes six recommenda-
tions. e researchers believe that if all
of them are adopted, "the actual outturn
cost of alliance projects could be im-
proved by 5%-15% without diminishing
the many bene ts the alliance delivery
method is capable of providing".
e recommendations include:
• that the alliance method be re-
tained and developed further for
the delivery of complex govern-
ment infrastructure projects with
significant risks
• that the state treasuries collaborate
to develop a comprehensive procure-
ment selection guide, training mate-
rials and common policy principles
• that governments take a greater role
in ensuring that alliance best practice
is captured and disseminated
• that a competitive process is used
having price as a key selection cri-
terion unless compelling reasons for
non-price competition can be made
and approved.